TMFPostOfTheDay (< 20)

Meteoric Rise & Crash of Bitcoins

9

Bitcoins, which have gained tremendously in value since Cyprus depositors were denied access to their funds, reached a high of $265 today before losing 44% of their record-high value and falling back to $150.

The following is an excerpt from Techcrunch*:

Bitcoin is undergoing a classic correction after quintupling in price over the past 30 days. The currency, which was trading as high as $265 earlier today on Mt. Gox, plummeted and is now trading at around $150.

We’ve reached out to one of the biggest exchanges, Mt. Gox, to see what happened. But another San Francisco-based exchange called TradeHill is saying that the crypto-currency is falling because of apparent distributed denial of service attacks on Mt. Gox and Bitstamp. A denial of service attack happens when an attacker overwhelms a target with external requests, so that it can’t honor regular requests from legitimate users.

This also happened last week when Mt. Gox when Bitcoin reached $142 and hackers attacked the exchange. At that point, Mt. Gox said it had suffered ”its worst trading lag ever.”

I sure wouldn't like to have purchased my Bitcoins at today's highs. I wonder who the "lucky" folks were.

With everything that's been going on with central bankers and politicians, the rapid devaluation of the yen and denial of access to one's accounts in Cypress, it's not surprising that folks are searching for alternatives to the present fiat currency system. So far, Bitcoins and Gold are the apparent candidates of choice for alternative currencies.

I like the idea of an alternative currency that can't be manipulated by bankers and politicians (I have a bit of an anarchist streak). However, an alternative currency that can be manipulated by computer hackers isn't my idea of a fitting alternative.

One of the Gold alternatives is the Swiss-made "Combi-Bar" gold bar made up of 1 gram sections. If you want to trade using small increments, you can just "break off" a piece (section) and keep the rest.

There has been much written about how physical Gold or Silver are much better than their electronic counterparts.

In any event, as many on the board have suggested, the US Dollar itself is thus far a beneficiary of the dislocations in all the currencies and their alternatives (much as the US stock market has been a beneficiary).

I wonder when people will start considering saving physical US Dollars, to be more desirable than the electronic ones that bankers have at their disposal - and that governments can confiscate electronically.